Cane area seen rising to depress sugar price

India’s sugar cane acreage is likely to rise in 2011-12 as farmers are still finding the crop remunerative over competing crops, raising hopes the world’s biggest sugar consumer will have a surplus for the second straight year beginning October.

Higher sugar output is likely to pressure the government to increase the export limit beyond 500,000 tonnes, to support local prices which have fallen 12 percent in 2011, said industry and government officials.

Maharashtra and Uttar Pradesh are top two sugar producers in the country and account for 60 per cent of the country’s total output.

In Uttar Pradesh, the area is likely to rise about 10 per cent in 2011-12 due to the increase in cane procurement prices and regular and timely payments to farmers by mills, said S P Bali, deputy commissioner at the sugar commissioner’s office.

“Acreage is estimated to increase by about 200,000 hectares to 2.3 million hectares in the 2011-12 season from 2.1 million hectares last year," he said. The federal government fixes minimum price at which millers can buy cane from farmers. It had fixed price at Rs 139.12 ($3.11) a quintal for 2010-11 season, but most millers bought cane at around Rs 200 a quintal.

Rizwan, a farmer from Hardoi district in Uttar Pradesh, says he has raised acreage under cane to 8 acres on hopes the government will raise support price again as assembly elections are round the corner.

“We expect cane prices to remain between Rs 220-230," he added.

In Uttar Pradesh, most of cane planting takes place between February and May and rest in September-October.

Most of the cane for the 2011-12 crushing season has already been planted. Acreage in the country stood at 5.061 million hectares as on June 3, compared with 4.863 million hectares a year ago, data with the farm ministry showed.

In Maharashtra, the state government is expecting the acreage to remain steady at last year’s level.

“In 2011-12, the cane acreage will remain steady at around last year’s level of 1.02 million hectares," said a senior official at the state’s sugar commissioner’s office.

MONSOON PLAY
Farmers, officials and analysts all said cane yields are dependent on monsoon rains, which covered half of the Maharashtra state five days ahead of normal time.

“Cane area has risen. Growing areas are getting good rainfall. It should help cane crop," said Ashwini Bansod, a senior analyst at MF Global Commodities India.

“But still many things depend on how weather remains in rest of the year, especially at the beginning and end of the crushing season," she said.

India’s weather office has already forecasted a normal June-September monsoon this year. Cane is a perennial crop and is harvested after 12-14 months from plantation.

It is also capital- and water-intensive and farmers get payments only after 13-15 months from cultivation.

“Sugar prices are depressed due to higher sugar production. They will remain under pressure unless the government allows more exports," said Ashok Jain, president, Bombay Sugar Merchants Association.

India has allowed exports of 500,000 tonnes for the current sugar year ending in September and the industry is demanding more exports to support falling local prices.